Tax Increment Financing for Optimal Open Space Preservation: an Economic Inquiry

The public has increasingly demonstrated a strong support for open space preservation. Questions left to local policy-makers are how local governments can finance preservation of open space in a politically desirable way, whether there exists an optimal level of open space that can maximize the net value of developable land in a community and that can also be financed politically desirably, and what is the effect of the spatial configuration of preserved open space when local residents perceive open space amenities differ spatially. Our economic model found the condition for the existence of an optimal level of open space is not very restrictive, the increased tax revenue generated by the capitalization of open space amenity into property value can fully cover the cost of preserving this optimal level of open space under a weak condition, and being evenly distributed and centrally located is very likely to characterize the optimal spatial configuration of preserved open space in terms of net social value and the capacity of tax increment financing.